4.1 - The Role of Marketing

Question 1

Define marketing.

Answer 1

The management that links the business to the customer by identifying and meeting the needs of customers profitably. It does this by getting the right product at the right price to the right place at the right time

Question 2

Name the 7 marketing functions.

Answer 2

Market research
Product design
Pricing
Advertising
Distribution
Customer service 
Packaging

Question 3

Name 5 market characteristics

Answer 3

Market size
Market growth
Competitors and ease of entry
Differentiated or homogeneous products 
Segmentation

Question 4

Define market size and how it is measured.

Answer 4

The total level of sales of all producers within a market
Measured in two ways:
Volume of sales (units sold)
Value of goods sold (revenue)

Manufacturer uses value or volume depending on what better reflects its position
Eg. Rolex will uses value as they sell fewer but more expensive watches

Question 5

Why is the size of a market important?

Answer 5

Manager assesses whether a market is worth entering
Business can calculate their own market share
growth/decline of the market can be identified

Question 6

Explain market growth.

Answer 6

The percentage change in the total size of a market (volume or value) over a period of time

Pace of growth depends on: economic growth, changes in consumer incomes, technological change, etc.

Depends on whether a market is saturated or not

Question 7

Explain competitors and ease of entry.

Answer 7

Ease of entry: the lack of barriers for the establishment of new competitors in a market
More competitors and easier market to enter = higher price competition

Question 8

What is the difference between differentiated and homogenous products?

Answer 8

Homogeneous products: goods that are physically identical or viewed identical by consumers (eg. milk, corn, bottled water, petrol)

Difficult to charge prices different from going rate for these products

Question 9

Define segmentation.

Answer 9

Dividing a market into distinct groups of consumers who share common tastes and requirements

Market segmentation → companies able to target different groups of consumers: perceive value of certain products/services differently from each other

Question 10

What are the differences between marketing goods and marketing services?

Answer 10

Consumer good: tangible physical product marketed to end users (consumers)
Consumer service: intangible provision of an activity to end users (consumers)
Services consumed immediately (cannot be stored), cannot be taken back to be repaired/replaced (service quality must be right the first time), people important for
service quality

Building trust
Time for delivery of service
Deliverability
Relationships

Question 11

What is perceived value?

Answer 11

Goal of service company: instill high perceived value of the service in the minds of the customer
Emotional connection is key element in service marketing

Question 12

What is market orientation?

Answer 12

outward looking approach that bases product decisions on consumer demand, as established by market research

Benefits:
Case of product failing is less
Consumer needs are met so the product will survive longer and make higher profits
Constant feedback from consumers helps product and marketing adapt quickly (earlier than competitors)

Limitations :
Business attempting to rescind to all trends may overstretch its resources and not do anything very well
Offering choice and range is expensive

Question 13

What is product orientation?

Answer 13

an inward looking approach that focuses on making products that can be made - or have been made for a long time - and then trying to sell them

Businesses invent products believing that consumers will purchase them

Businesses concentrate their efforts on efficiently producing high-quality goods. (quality valued above market fashion)

Question 14

Define social marketing.

Answer 14

This approach considers not only the demands of consumers but also the effects on all members of the public involved in some way when firms meet these demands

Focuses on stakeholders as well as business and its consumers

Attempts to balance company profits, consumer wants and societies interests

Considers long term welfare (consumer and societal - protecting environment and paying workers good wages)

Still identify consumer wants and needs but in a way that enhances consumer and societal welfare gives business competitive advantage

Question 15

What is the difference in objectives for social marketing and commercial marketing?

Answer 15

Main objective of commercial marketing = financial return

Main objective of social marketing = social good

Question 16

Define market share.

Answer 16

the percentage of sales in the total market sold by one business

Question 17

Describe how market share is calculated.

Answer 17

Firms sales in time period divided by total market sales in time period. Multiply by 100 to get a percentage of market share.

Question 18

What are the benefits of being the market leader (having the most market share)

Answer 18

Sales are higher than competitors in the same market: higher profits perhaps

Retailers keen to stock and promote best selling brands (can have prominent positions in shops)

If shops want to stock the product, it could be sold to them with a lower discount rate which must be offered by the smaller, competing brands. This and higher sales leads to higher profitability for the producer of the leading brand

Can be used in advertising or promotional material.
Consumers want to buy the most popular brands

Strong bargaining position with suppliers and retailers.
Suppliers: want to have long term contracts with most successful company (benefit their status + reliable)
Retailers: want to stock this product
This means lower costs and longer credit periods
Higher selling prices to and short payment period returns from retailers
Recruitment of high class employees is easier
Financing easier: banks and investors convinced that status means stability

Question 19

What are the disadvantages of being the market leader?

Answer 19

Puts pressure on a business and staff to continue doing well
Business media looking for slippage and will report if a business is ‘failing’
Too much emphasis on market share might take attention away from profitability
Price cuts and and lower profit margins may help market share but might not be good in the long term

Question 20

What are marketing objectives?

Answer 20

The goals set for the marketing department to help the business achieve its overall objectives

Question 21

Why are marketing objectives important?

Answer 21

Provide sense of direction for marketing department
Progress monitored against targets
Can be broken down into regional and product sales targets to allow for management by objectives
Form basis of marketing strategy

Question 22

What are the marketing objectives of for-profit organisations?

Answer 22

Business with short term profit targets focuses on maximising sales at highest price possible
Examples of a for profit organisations marketing objective inc. increase in:
Market share
Total sales
Average number of items purchased per customer visit
Frequency that a loyal customer shops
% of customers who are returning customers (loyalty)
Number of new customers
Customer satisfaction
Brand identity

Question 23

What are the marketing objectives of non-profit making organisations?

Answer 23

Maximise revenue from trading activities
Increase recognition of the organisation by society
Promote the work and aims of the organisation to a wide audience

Question 24

How do non profit making organisations differ from for profit organisations?

Answer 24

3 characteristics that non profit orgs. have that distinguish from for profit orgs:

Do not have external shareholders providing risk capital for the business

Do not distribute dividends - any profit is retained for further capital

Organisational objectives include some social, cultural, philanthropic, welfare or environmental dimension